MUMBAI: Singaporean company SingTel, which is the largest investor in Bharti Airtel, has raised concerns over the proposed merger of the company’s telecom and direct-to-home (DTH) business with that of Tata Communications.

SingTel, which effectively has around 36% stake in Bharti Airtel, has raised questions regarding the rationale behind the deal between Bharti Airtel and Tata Tele along with Tata Communications and Tata Sky, CNBC TV18 reported quoting sources.

SingTel is concerned about the huge debt that Tata Telecommunications has and also the synergy with Bharti Airtel’s portfolio. The debt is over Rs 30,000 crore.

The Tata Group is in exploratory talks with Bharti Airtel for a possible merger of Tata Tele, Tata Communications and Tata Sky with Bharti Airtel, which has interests in telecom and DTH businesses. The company runs its DTH business under Airtel Digital TV brand.

While the talks are for combining telecom, overseas cable and enterprise services, it also includes DTH business as a sweetener.

21st Century Fox is also said to be in talks with the Tata Group to up its stake in Tata Sky. While the Tata Group owns 60.2% stake in the DTH firm, 21st Century Fox effectively holds 29.8% stake and the remaining 10% is with Temasek Holdings.

The DTH sector is in the midst of a consolidation wave, with Dish TV and Videocon d2h merging to create a DTH behemoth. Reliance Digital TV has also been put on the block by its owners Reliance Communications as part of the latter’s debt reduction plan. Astro Malaysia, which owns a 20% stake in Sun Direct, is believed to be interested in buying Reliance Digital TV.

The merger of Airtel Digital TV and Tata Sky will reduce the number of DTH operators to four. However, the deal between Tata and Bharti Airtel for combining DTH businesses will have to be separate from the telecom deal.

The six Indian DTH companies have a net subscriber base of 63.61 million, as of 31 March 2017. Dish TV has a 25% share of net subscribers compared to Tata Sky’s 23%. Airtel Digital TV’s share is at 21%, Videocon d2h at 20%, Sun Direct at 9% and Reliance Digital TV at 2%.

As reported earlier by TelevisionPost.com, there is a case for the Tata Group and Bharti Enterprises to work out a broader deal. But this is not because telecom and DTH companies need to combine. The need springs from the fact that the two sectors need to bring down the number of players operating in these businesses. Like telecom, DTH needs a consolidation wave. The common thread is that the Tatas and Bharti have presence in both telecom and DTH.

The deal needs to be worked out separately. In case of telecom, working out a deal is possibly simpler. The Tatas are very keen to cut down their losses from the telecom business. Besides, Idea and Vodafone have combined, and so are Reliance Communications and Aircel.

The DTH deal would be a more complex exercise as Tata Sky is a JV between the Tata Group and 21st Century Fox. Murdoch wants to increase stake in Tata Sky. Star India, 21st Century Fox’s wholly owned India subsidiary, will not want to be part of the telecom venture. Therefore, the DTH deal has to be dealt with separately. It has to be an entity having the DTH businesses only. The possibility could be that Star’s holding remains the same in the merged entity while Tata Group gets to dilute its stake.

Turning around in FY16, Tata Sky posted a net profit of Rs 80.08 crore on a revenue of Rs 4,490.96 crore. A year ago, net loss was Rs 267.27 crore on a revenue of Rs 3,739.04 crore.